Agenda - 05-04-1999 - 3b - Laserfiche WebLink

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ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: May 4, 1999 Action Agenda Item No. 3_b SUBJECT: Resolution and Modification Agreement to Refinance Installment Purchase -McDougle Elementary School DEPARTMENT: Finance PUBLIC HEARING: (Y/1~ No ATTACHMENT(S): 4/23/99 Letter from Bond Counsel 4/26/99 Commitment Letter from NationsBank Resolution Modification Agreement INFORMATION CONTACT: Ken Chavious, ext 2453 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To consider adoption of a resolution and modification agreement authorizing the refinancing of an existing Installment Purchase Loan with NationsBank. BACKGROUND: In January 1995 the County entered into an installment purchase agreement with NationsBank to finance the construction of McDougle Elementary School. The terms of financing agreement consisted of funds totaling $9.6 million fora 15 year period at an interest rate of 5.71 %. This financing was the first of its kind to be undertaken by the County for school construction. As a matter of procedure, the County Finance Department monitors market conditions for the purpose of maximizing the County's investments as well as pursuing opportunities to refinance existing debt. The County refinanced the 1988 bonds in 1993 and achieved significant savings. The County's current debt structure consists of general obligation bonds and installment purchase agreements. All of this debt has interest rates below 5% except for the NationsBank Loan mentioned above. The Finance Director in monitoring the mazket determined that the timing was right to pursue a refinancing of the NationsBank loan. The outstanding principal balance on the existing loan is $7.3 million and the remaining term is 10 years. The process for refinancing an existing installment loan is much less complicated than refinancing bonds and/or entering into new installment loans. The major requirements are that the Boazd adopt a resolution and a modification to the existing agreement. Since a refinancing saves money, the Local Government Commission (LGC) does not require a complete application process. The LGC reviews the modification agreement to verify the savings and insure that the terms are appropriate. This process is performed by the LGC staff and does not involve the formal review of the Commission.